What's the most tax-efficient way to structure a joint venture?

• Posted by Ben James
• Date 21st March 2016
• Leave a comment

When it comes to joint venture agreements there's many ways to skin a cat. If you type into Google "joint venture agreement templates" you'll come across plenty of different terms and conditions within each agreement but what truly is the most tax-efficient way to structure a joint venture agreement? 

Within Estateducations' 'hybrid joint venture model' we use a legal framework that provides the most tax-efficient way whilst also not entwining each parties personal and business finances too closely together which is very important as it allows each party to raise private finance in their own names / companies if need be. 

Once a property investment opportunity has been sourced by the Estateducation Team, it's purchased using a Special Purpose Vehicle (SPV); an LLP (Legal Liability Partnership) trading entity which has been formed for the sole purpose of holding the underlying asset. It will not carry or leverage any debt and will have no employees.

Typical objectives facing both partners in a property investment joint venture involve tax-efficient profit distribution, financing and limited financial integration between both partners/parties. We achieve this by using the LLP as the trading entity, and have two limited companies and two individuals as partners in a membership agreement. Estateducation Ltd is one of the limited companies with its Director as its individual partner and the other limited company and individual is the choice of the Joint Venture Equity Partner.

Using this model allows each partner/party and / or company to link together for a single project, receive their profit share tax efficiently, yet be able to file the LLP accounts according to how they wish to distribute their own profits – a simple and clean end to the joint venture.

The SPV is managed throughout by Estateducation as part of its lifecycle 'hybrid joint venture model' and that includes the accounting of the venture therefore leaving the Joint Venture Equity Partner free to concentrate on other important matters such as work and family life. 

Both the membership and joint venture agreements we use are very detailed and were put together by Commercial Lawyers. These agreements allow our 'hybrid joint venture model' to work effectively and provide peace of mind to the joint venture partner with security of funds protected via bricks and mortar.   

If you'd like to learn more about joint venturing with Estateducation and earning returns such as this case study, then please get in touch via our Contact page or simply leave a comment below, we would love to help.

Thanks for reading, 

The Estateducation Team.